Getting better or getting worse? Consumer responses to decreasing, constant, and ascending multi-dimensional price profiles

Abstract

This research investigates consumer preferences for different multi-dimensional price profiles. Drawing on research on price affect, we investigate whether consumers prefer descending monthly installments (e.g., 40, 30, 20, 10) over constant (e.g., 25, 25, 25, 25), or ascending ones (e.g., 10, 20, 30, 40). Results of a field experiment with a sample of 1,628 German car buyers corroborate the hypothesized profile effect. In the experiment, participants were asked to evaluate different finance offers for a new car that all had the same present value but differed in terms of how the installments unfolded over time. Consistent with the hypotheses, decreasing monthly installments are evaluated more favorably than constant installments, which, in turn are evaluated more favorably than ascending installments. Furthermore, the results provide evidence for the underlying process by showing that the impact of different MDP profiles is mediated by positive affect. Finally, it was hypothesized that consumers’ individual differences (i.e., debt aversion, financial expectations, and product category knowledge) would exert a moderating influence on evaluations of different price profiles; these hypotheses, however, were only partially confirmed. Theoretical and managerial implications are discussed.